Critics of the controversial multi-state gas pipeline project— Independence Pipeline and the associated SupplyLink andMarketLink expansions — insist FERC treated the projects with kidgloves in its interim order last month, while the project sponsorsargue the Commission held their projects to unprecedented higherstandards that may be impossible to meet.

Both sides are seeking rehearing of the decision, whichconditionally approved the projects but withheld certificates untilgreater market support is shown.

The New Jersey Attorney General’s Office called on FERC lastweek to “reconsider and reverse” its decision on the hotlycontested MarketLink project, a pipeline expansion that would runthrough the northern part of the state. It wants the Commission toaddress on rehearing the issue of whether it is safe to site theproject in the densely-populated Garden State. In the mid-Decemberinterim order, FERC failed to tackle the safety issue, saying itwas out of its jurisdiction.

The question of pipeline safety, which New Jersey contends iswithin FERC’s jurisdiction, “is not an academic debate to thepeople of New Jersey,” many of whom still vividly recall theexplosion of Texas Eastern Transmission’s line in early 1994, wroteDeputy Attorney General James Martin in the state’s rehearingrequest.

“The image of that fireball in Edison, NJ, and of the 1,500people whose homes were destroyed was seared into the memory ofvirtually every one of the seven million citizens of this state.These citizens demand that their government not impose this massivepipeline upon them unless and until they can be assured that thesiting, routing, operation and maintenance of the proposed pipelinewill be safe — not just a little bit safe, not just minimallysafe, but really safe, maximally safe,” he told the Commission.Joining New Jersey in its rehearing request was the New JerseyBoard of Public Utilities and the New Jersey Department of Law andPublic Safety.

New Jersey contends the 1968 Pipeline Safety Act gives FERC theresponsibility to consider all factors affecting public interest,including safety considerations. The state also cited a 1979 Senatereport that noted “FERC will retain its authority to impose safetyconditions exceeding DOT’s standards” only in “exceptional cases.”The proposed MarketLink expansion is an “exceptional case,”according to New Jersey.

In its rehearing bid, Transcontinental Gas Pipe Line — whoseMarketLink project is the only one that is substantially subscribed(95%) — objected to FERC holding its certificate hostage untilIndependence and SupplyLink can deliver long-term contracts withnon-affiliated shippers for at least 35% of their projects’capacity [CP98-540].

Although it is often linked to Independence and SupplyLink,Transco stressed that MarketLink could successfully operate withoutthe two upstream projects. As a back-up, it said it could turn toother expansion projects currently proposed and under developmentto bring in Canadian and Midwest gas to the New Jersey and New Yorkmarkets.

Independence contested the Commission’s decision relegating itscertificate to limbo until it can supply non-affiliate contractsfor at least 35% of project capacity. Before construction canstart, FERC has required Independence to execute contracts for68.6% of its summer capacity and 62.8% of its winter capacity.

This is an “unjustified and unsupported departure” from FERC’sprior pricing policy, which required pipes to submit long-termcontracts for only 25% of the capacity of their new projects asproof of market support, according to Independence [CP97-315]. TheIndependence project is subject to the pricing policy that was ineffect prior to the new policy statement, which was issued lastSeptember.

In the interim order, the Commission refused to acceptIndependence’s contract with affiliate DirectLink, which was for55% of the capacity of the proposed line, as proof of the project’smarket demand. It also discounted the pipeline’s contracts withEnron Capital and Trade Resources and Eastern Energy Marketing Inc.because they had “market out” clauses and, therefore, were notbinding.

Independence contends the Commission is holding it to a higherstandard than other pipeline projects. “…..[I]n the past, theCommission has given equal weight to precedent agreements betweenan applicant and its affiliate and unrelated third parties.”

Independence wants to know why FERC didn’t inform it earlier ofthe problem with the DirectLink precedent agreement so it couldremedy it. The contract was filed at the Commission in September1997.

The Commission said it imposed sterner conditions onIndependence and the associated projects because of the magnitudeof the undertaking and the potential for disruption to theenvironment, and due to the fact that Independence was way off themark when it predicted that its proposed line would be fullysubscribed.

But Independence pointed out that FERC’s very own environmentalimpact statement on the joint projects said they “would result inlimited adverse impact” if mitigation measures were employed. Asfor Independence’s initial prediction, Independence countered “thishardly justifies imposing the 35% requirement. [The] predictionthat it would be fully subscribed was only a prediction and wascharacterized as such.”

Independence and Transco also objected to FERC prohibiting thestart of construction on any section of the three projects untilall properties are surveyed, environmental surveys are completedand all consultations with resource agencies are finalized. The twocontend this also departs from Commission precedent, which theysaid permits pipes to start construction on parts of pipelineprojects that have been surveyed.

FERC said it imposed the restriction because significantportions of affected properties in Ohio and Pennsylvania still havenot been surveyed. Again, Transco said its project is beinghamstrung by Independence and SupplyLink. “Transco has completedall of the environmental survey work for the MarketLinkproject…..”

Due to the surveying restriction, FERC’s requirement thatconstruction of Independence be finished within two years ofissuance of a certificate is impossible to meet, according toIndependence. It believes it would be “more reasonable” if theCommission would require the greenfield pipeline to be built and inservice two years after giving the go-ahead for construction.

Sen. Frank Lautenberg (D-NJ) also urged FERC to reconsider itsdecision on the MarketLink expansion, but for much differentreasons than those of Transco. Although the interim order “imposeda variety of conditions” on the Transco project, “there are many inNew Jersey who believe the FERC decision did not adequately addressa number of vital issues,” he wrote to the Commission.

“In particular, there is great concern over FERC’s apparentacceptance of the applicant’s information regarding the need fortheir product in New Jersey. Many believe that this pipeline is aspeculative venture and that true market demand in this state, aselsewhere, has not been demonstrated,” he said.

The Ohio Pennsylvania Landowners Association (OPLA) wants FERCto impose a Feb. 15 deadline by which Independence and ANRPipeline’s SupplyLink expansion must submit the long-term contractsfor 35% of their projects’ capacity.

Moreover, “we request that a verification, documentation andsubstantiation of all contracts be conducted by the FERC staff andthat copies of all documents be forwarded to the secretary of theOPLA,” the landowner association said. The OPLA also seeks a delayin the certification of Independence and SupplyLink, as well as theMarketLink project, until an “impartial and independent”supplemental final environmental impact statement on the projectscan be prepared, as was initially requested by Texas EasternTransmission.

Susan Parker

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